Kuwait Power Report Q1 2015

BMI View: The Kuwaiti power sector is facing a number of significant challenges in the years ahead. Withpower generation struggling the keep up with growing demand, much greater levels of investment areurgently needed. However, with the sector almost wholly state-owned and operated, and a highly restrictiveregulatory environment, attracting major investment is difficult.

Kuwait's first public-private partnership for the construction of the 1.5GW al-Zour power plant anddesalination plant has the potential to set a precedent for greater private sector engagement within Kuwait'sinfrastructure and power sectors. At the same time, the government is attempting to scale back its generousregime of energy subsidies, which have led to overconsumption and waste. It remains to be seen howproposals to reduce subsidies will play out, although the issue adds another layer of complexity to thegovernment's attempts to spur investment.Conventional thermal sources have long been the dominant fuelfor energy generation in Kuwait, and despite some government efforts to diversify the sector, oil andgas will remain the dominant energy source over the coming years. Following the Fukushima tragedy in2011, Kuwait ordered the National Nuclear Energy Committee to be dissolved and officially abandoned itspursuit of nuclear power. However, the country is nevertheless aiming to reduce its domestic oilconsumption in an effort to free up additional barrels for export, with many power projects that are plannedor under construction set to use gas.